Your Forex broker is on your side right?
Why else would he give you so many free courses, indicators and sign-up bonuses – Surely he wants you to win?
95% of Forex traders lose…
Something your broker knows only too well.
Do you think your broker has built his business on the minority 5% who win, or the much, much larger 95% who lose?
Whether you’re already in the 5% elite or working your way to it, knowing these three things can make the difference between long-term successes or Forex failure.
Simply read on to find out what these brokers don’t want you to know!
So what does your broker think about you?
You are either an “A” group or a “B” group trader from your broker’s point of view.
“A” group traders make up the 95% who constantly lose.
If your account is new, you’re automatically added to the “A” group until you prove otherwise.
“B” group traders are people who have been consistently profitable or more than 3 months.
You may ask why new accounts are lumped with the losers.
Simple – Your broker knows that 95% of new traders will lose, so he’s 95% sure he’s put you in the right group.
Why does any of this matter?
Well many Forex brokers are what are known as market makers.
A market maker takes the other side of your trade.
For example, let’s say you decide you sell 1 standard lot of EURUSD.
Now for you to take that trade, someone else has to buy 1 standard lot of EURUSD, in other words, there always has to be a buyer and a seller for a trade to take place.
All of this is handled electronically almost instantly, but never forget that someone somewhere is holding the other side of your trade.
If your broker is a market maker, he’s holding the other side. In other words, if you win, he loses. If you lose, he wins.
Your broker may be making a profit every time you lose
This is the first thing that many brokers don’t want you to realise.
They make most of their money betting on the fact that you are going to lose.
To take a very simplistic view of things – If 95% of traders lose, why not take the other side of these trades and win 95% of the time?
Are all brokers like this?
No – Many brokers don’t take the other side of your trades, instead they pass them on to other traders, acting more along the lines of what you would imagine a ‘broker’ to do.
They simply connect buyers and sellers and take a commission on facilitating the trade.
These brokers are typically known as Straight Through Processing (STP) or Electronic Communications Network (ECN) brokers.
At Vunani Private Clients we only provide STP processing! We will never take the other side of the trade, and we will never bet against our clients.Of course, if you are a constantly profitable trader, you’re the one in the pound seat calling the shots, but more on that later.
What about all those free courses and indicators?
Does your broker offer you free courses?
New trading strategies?
Are you constantly searching for newer, better systems?
Looking for the ‘holy grail’ of EAs?
This is the second thing your broker doesn’t want you to know:
You are stuck in the cycle of doom.
The Cycle of Doom:
Step 1 – Search: In this phase, you’re searching for a trading system. Books, magazine, forums, websites…it’s all fair game while you hunt down the ‘holy grail’ of FOREX trading. You leave phase 1 when you find a system that really gets you excited. You don’t really bother testing it because it looks so good.
Step 2 – Try: Filled with excitement you begin to trade with your new system. Now you’re going to make your millions! Profits start piling in, things are going well. And then a drawdown appears (because eventually it will) just as you start to increase your risk. And just like that, you lose faith in your new system. Guess it wasn’t for you after all.
Step 3 – Blame: Because your system hasn’t consistently won, you dump it. It’s the systems’ fault. You’re frustrated, back where you started. Guess it’s time to look for a new system right? Back to “Search”.
If you had tested your system properly, you’d know that drawdowns are a normal part of trading and you would have simply pushed through and probably have recovered your losses already. Instead, you jump from system to system.
Keep in mind, who’s making money this whole time on spreads, commissions and potentially the other side of your losing trades?
That’s right, your broker is.
Now while it’s unfair to blame your broker for your lack of discipline in sticking with a system, know this: Your broker is well aware of the cycle of doom and makes money every step of the way.
All those trading systems and indicators he offers you to try again when things go wrong?
Guess what, they are not for your benefit!
And the final trick your broker may use against you…
So let’s say you make it to profitability.
Welcome to group B – Traders who make money.
Except, your broker has one last trick up his sleeve and it’s a goodie.
Scalpers – Take special note because this can put you right back into the ranks of the losers.
Your broker will start to slip you.
What does that mean?
Simply it means that your orders aren’t opened or closed at the prices you set – your broker allows himself some leeway – a few pips here and there.
Doesn’t sound too bad right?
But it is.
Your broker has a wealth of information available to him that you don’t have.
Sure, you can see the current price of something, but your broker can see every order, every pending order, every profit target, and every stop loss.
Want an example?
OK. Let’s say you’re buying EURUSD at 1.3510, your take profit is 1.3520 and your stop loss is 1.3500.
Price rockets up in your favour going all the way to 1.3520 but you aren’t cashed out because your broker is slipping your take profit by a few pips, say to 1.3512.
He does this because he knows that at 1.3511 a whole lot of pending sell orders will be opened which will push price down and stop you from cashing out.
Anyway, all those other pending sell orders are opened at 1.3511 and price falls.
It falls all the way past your entry and goes to 1.3502 and guess what, you are stopped out for a loss.
Price never hit your stop loss level but you lose because your broker fulfils your order at 1.3502 because he can.
Think this doesn’t happen?
The famous Turtle Traders during the mid-1980s did not use stop loss levels because they saw their own brokers ‘hunting stops’ in this way. Instead they manually closed trades.
The house always wins right?
Does that mean your broker always has to win too?
The key to beating your broker at his own game is simple (but not necessarily easy).
First, you need to understand that he’s not as “on your side” as you may think.
But that’s OK, business is business. You can become a “B” group trader and he can’t stop you.
Secondly, and most importantly, follow a strategy consistently.
I typically trade 5-10 times a month and every couple of months, I have a drawdown.
My subscribers go through a period (with me) where we lose 3 or 4 trades in a row.
And that is completely normal.
I don’t change our strategies. I don’t panic. I know that the next 10 trades could all be winners.
I stick to it and we make profits in the long run.
You can do this with me.
Finally, know that when you become a profitable trader, your orders are going to get slipped.
If you trade like I do, where I’m aiming for a 200+ pip win, you can just adjust your target to a price where your broker won’t have a choice but to fulfil it.
You won’t get spiked out on 5 minute moves.
Our broker can slip us all he likes – It doesn’t affect our profitability and it doesn’t have to affect yours.
Let your broker play his little games while you make real money
You now know three things that most traders don’t know, or worse yet, choose to ignore!
Do you want to join the “B” group, the consistently profitable traders?
I bet you do!
Now that you’re a little more aware of how the odds are stacked against you, don’t let these things determine your success or failure!
Here’s to profitable Forex trading.
Lead Trader | Practical Pips
PS: If you’d like to Fast track your Forex trading and join the “B” group faster than you ever thought possible, why not join my 500 pip challenge? Every month I help you try bank 500 pips, simply click here to find out more.